Targeting enforcement to improve compliance with environmental regulations

By targeting enforcement efforts on specific segments of the regulated community, greater compliance with environmental regulations can be achieved. In this paper, the inspection minimizing targeting scheme with two groups is derived. Firms are moved at random into the target group, while escape from the target group occurs only when an inspection reveals the firm is in compliance. The optimal targeting scheme reduces inspection costs compared with the strategy suggested by Harrington (J. Public Econom. 37 (1988) 29), where firms are moved into the target group on the basis of compliance record. However, the range of parameter values for which the optimal solution is feasible is limited.